Overview the Logistics Industry in the Northern Region

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Overview the Logistics Industry in the Northern
Region the need to enhance its effectiveness
and competitiveness
Penang Logistics Seminar 2007 5 July

• Presented by Mr. Thong Yow Chuan, B.A. FCILT,
  Executive Director, TYC Resources Sdn Bhd

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LOGISTICS
Raw Materials
Factory
Warehouse
Consumer
Logistics
Logistics
Logistics
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New Millennium Challenges
Logistics SCM
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Sea Transport
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Sea Transport
Penang Port
Passengers (Swettenham Pier)
Cargo
Container (NBCT BWCT)
Conventional (B/W)
Bulk Dry (Prai) Liquid (B/W)
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Penang Port Cargo Throughput (million FWT)
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Container handling

• 2006, container throughput - 849,730 teus,
  increase of 6.8 over 2005.
• 406,493 teus (47.8) - import containers
• 421,688 teus (49.7)-export containers
• 21,550 teus (2.5) - transshipment.
• Export containers 117,954 teus (27.97 ) - from
  South Thailand via rail transport through Padang
  Besar, by road through Bukit Kayu Hitam / Betong
  and by barge through Kantang.

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Logistics Performance at Penang Port

• Container ports performance vary significantly
  from terminal to terminal based on the type of
  vessel, number of bays, distribution of
  containers over the various bays, the ports
  gantry crane potential, the speed of the cranes,
  their capacity and the experience of the drivers.
  
• Penang Ports average quay crane performance is
  between 20 to 22 moves per hour as compared to
  major ports average of 25 moves per hour.

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Shipping services at the port

• Penang Port is served by 20 container shipping
  lines with direct vessels calls to China, Japan,
  Korea, Taiwan Hong Kong and feeder services to
  North Port, Westport, PTP, East Malaysian Ports
  and Singapore Port.
• Penang Port unable to achieve transshipment port
  status mainly due to geographical location,
  inaccessibility to large vessels, low local base
  cargo, small hinterland and immense competition
  from established North Port, Westport, PTP
  Singapore

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INLAND TRANSPORTATION
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Container Road Haulage

• Container road haulage activities have expanded
  due to the liberalization of the industry with
  new container road hauliers from the central and
  southern regions. 15 hauliers operate in the
  north compared to 5 previously.
• Although rate for haulage of a 20ft container has
  been increased to that of a 40ft container, due
  to the overcapacity and fierce competition, users
  pay a negotiated rate depending on their volume,
  accessibility to their premises, type of cargo
  and payment terms.
• The situation is bad for the road haulage
  industry as low rates and high operating cost of
  fuel, spares and human resource is squeezing the
  profit margins of the operators.

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Bonded Trucking

• Bonded trucking activities in the North are
  confined to
• Movement of goods between the Penang
  International Airport (PIA) and factories in the
  FIZ or LMW in the industrial estates,
• Between factories and the KLIA,
• Between the PIA and KLIA,
• Between factories in the FIZ and industrial
  estates
• Between factories and Singapore.

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Bonded Trucking

• In the northern region, around 30 companies
  provide these logistics services. In 2006,
  members formed the Bonded Trucking Operators
  Association of Malaysia which is inactive due to
  poor participation by members.
• Trucking rates are not standardized and have
  stagnated and operations costs have risen making
  it difficult for the companies to operate.
• High losses due to robberies hijacks have
  raised insurance premiums and increase in claims
  from clients.

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Railway

• Rail haulage of containers is by KTMB for the
  movement of containers to between Penang Port and
  Padang Besar

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South Thai Cargo Traffic through Penang Port
2005
2006
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South Thai Cargo Traffic through Penang Port
2005
2006
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South Thai Cargo Traffic through Penang Port
2005
2006
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South Thai Cargo Traffic through Penang Port
2005
2006
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• Since April 2007 KTMB has deployed the Blue Tiger
  trains that can pull 60 teus wagons a time as
  compared to the older trains that can pull only
  40 teus wagons.
• Due to the limitation of the lines at 4 private
  depots, loading of empty containers is slow and
  frequently upsets trains schedules.
• Padang Besar Terminal has further improved its
  infrastructure at the terminal with additional
  storage space and deployment of additional
  equipment and streamlining the flow of containers
  through the terminal.

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Cross Border Traffic

• Bukit Kayu Hitam (BKH) at the Kedah border is
  Malaysias largest road gateway for commercial
  traffic with Thailand.
• The volume of commercial traffic through BKH over
  the last few years is as follows

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• With massive commercial traffic over the border
  point daily, there have been numerous
  representations by the users to ease the
  congestion due mainly to the payment of the RM
  10.00 fee to LKIM at its check point which forces
  commercial vehicles to queue for up to 3 hours.
• The imposition of a levy of 0.05 sens per kg by
  LKIM in 2006 for all movements of seafood
  products into Malaysia resulted in termination of
  transit movement of around 100 containers of Thai
  seafood exports through Penang Port monthly.
• The LKIM levy on the transit movement of Thai
  seafood through Penang Port was waived in the
  past. As seafood exports from Thailand has high
  growth potential, Penang Port is the looser due
  to the diversion of these cargo to Thai ports.

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AIR LOGISTICS
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AIR LOGISTICS

• In the air cargo sector, cargo tonnage through
  the Penang International Airport (PIA) increased
  by 38 between 2001 2005.
• The growth of the air cargo traffic was due to
  the rapid growth of the electronic and semi-con
  industries in Penang and its hinterland

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AIR LOGISTICS
Cargo through Penang International Airport (000
metric tonnes)
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TOTAL LOGISTICS
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TOTAL LOGISTICS

• The total logistics industry encompasses
  freighting, forwarding, trucking, warehousing and
  delivery from supplier to manufacturer and
  manufacturer to buyer.
• The demand for total logistics has spawned the
  expansion of the presence of international
  freight forwarders (IFF) setting up in the
  northern region, especially in the FIZs in
  Penang.

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TOTAL LOGISTICS

• Vast network overseas and direct communication
  with the corporate headquarters of MNCs, enabled
  IFFs to secure their contracts at the corporate
  level, offering competitive freighting
  arrangements and efficient services.
• Local freight forwarders are sidelined to only
  providing sub-contract services of trucking,
  haulage and warehousing. Due to competition
  amongst local freight forwarders and the small
  volume of local business activities available,
  rates offered by IFFs are depressed

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Penang Freight Forwarders Association members 2006
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MEASURES TO MEET THE CHALLENGES
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Lack of follow through and a single body to
coordinate

• There are many bodies, associations and parties
  involved in promotion and improvement of the
  efficiency and activities of the logistics
  industry. These include
• MITI, MOT, MIDA, NSC, FMM, PFFA, FREPENCA, AHAM,
  ISOA, NMSA, PPSB, PPC, MAB, MAS, KTMB MLC

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• Industry observers note that while there have
  been numerous meetings and discussions on issues
  raised, there must be follow through to
  permanently rectify the situations.
• Issues involving one sector are not looked into
  in total as to how it will affect other sectors
  of the logistics industry as a whole.
• Industry observers also note that there is the
  lack of a single body that can coordinate and
  monitor all the logistics activities and their
  development so that all sectors of the logistics
  industry will benefit from the shared information
  .

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Establishment of the MLC active local branch
needed

• The Malaysian Logistics Council under the
  chairmanship of the Deputy Minister of
  International Trade and Industry set up by the
  government in recognition of the importance of
  the logistics sector under the Third Industrial
  Master Plan (IMP3) is a most welcomed positive
  step.
• The MLC with 5 focus groups with specific
  purposes covering maritime transport services,
  land transport services, air transport services,
  ancillary logistics, supply chain management and
  HR development is in a strong pivotal position to
  oversee the activities of all logistics sectors
  and promote their development in a coordinated
  manner

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Establishment of the MLC active local branch
needed

• While it is necessary for a central body such as
  MLC to coordinate the logistics industry, the
  establishment of a Northern Branch of the MLC
  with a strong active presence is crucial to the
  industry in the northern region due to the issues
  mentioned

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Dissemination of information of development,
expansion etc to all sectors

• For the benefit of the industry in the northern
  region, it is essential that the activities of
  various sectors are made known to all sectors so
  that they can all work together towards a
  direction, as to how their services and
  facilities can be channeled towards the success
  of the development proposed and contribute
  towards positive participation at the same time.
• Setting up of new industrial estates or
  expansions and the establishments of new
  investments should be disseminated to all sectors
  of the industry which can then advise the MLC as
  to how they can participate in the new business
  opportunities

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Dissemination of information of development,
expansion etc to all sectors

• Similarly, expansion plans, new IT enhancements
  and expansion of activities of logistics service
  providers, both international and local should be
  more transparent

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Transparency issues of IFF

• It is unfortunate that due to competition and
  security reasons, corporate policies of IFFs are
  such that the management is not allowed to
  present papers at seminars or even be members of
  associations.
• Visits to warehouse facilities by members of
  logistics associations are also vetted by the IFF
  and if visitors are from rival logistics service
  providers, such visits are disallowed.
• This security arrangement unfortunately makes
  the IFF less transparent and unwilling to share
  their expertise and their development plans for
  the betterment of the industry

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Assistance to local service providers

• Local services providers are increasing relegated
  to provide localized logistics services due to
  their inability to participate in international
  logistics activities as a result of limited IT
  linkage, overseas corporate network and capital
  investment.
• They can be assisted through partnership matching
  with appropriate IFF and financial assistance to
  establish technologically advanced supply chain
  management systems.
• Hands on training attachment with selected IFFs
  will further enhance the capabilities of the
  local service providers

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No single established source of logistics data
and information

• There is no single established source of
  logistics information and data. Each sector has
  its own limited data mainly on membership. There
  is a lack of data on facilities, services and
  capabilities of the sectors. A record of such
  useful information will enable the coordinating
  body to analyze the shortcomings of each sector
  and what can be done to rectify such weaknesses.

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Further enhancing Penang Ports capabilities

• While Penang Port has plans to improve its
  services and expand its facilities over the next
  5 years, it needs to secure new markets to ensure
  its future growth. With more consistent
  efficiency and increases in productivity through
  upgraded and new equipment and more professional
  human resource, the port can encourage more and
  new direct vessel calls especially from West
  Asia.
• The substantial growth of the Thai traffic needs
  to be carefully nurtured with the proactive
  participation of all parties involved in the
  trade and levels of efficiency improved and
  sustained. The past occurrences of congestion and
  delays of arrival of Thai export containers from
  Padang Besar to Penang Port can only be overcome
  with the completion of the full development of
  the facilities at the Padang Besar Terminal

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Improvement of Railing services

• KTMBs problem of having to service several
  container depots can only be solved through the
  establishment of a single well planned depot
  where all empty containers for the Thai traffic
  can be consolidated for railing, thus saving
  shunting movements at different depots which also
  have limited rail shunting space

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• Note This overview is by no means thorough and
  is meant to provide only a brief into the
  activities of the logistics industry in the
  northern region, its challenges and what needs to
  be done to improve its efficiency and standing
  among its users

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Thank you